Foreign investment in Brazil’s productive sector doubled in 2022

Foreign investment in Brazil’s productive sector almost doubled in 2022, reaching the highest absolute value (in dollars) in the last ten years. In comparison with the size of the Brazilian economy, contributions reached the highest level in 22 years.

According to a report on the external sector published this Thursday (26) by the Central Bank, the balance of Direct Investment in the Country (IDP) was US$ 90.6 billion last year, 95% higher than that calculated in 2021 (US$ 46 .4 billion). This is the best nominal result since 2012, when investments totaled US$ 92.6 billion. All values ​​are “net”, that is, they already exclude capital outflows.

Foreign investment easily surpassed the expectations of the BC itself – which, at the end of September, had revised its IDP estimate for the year from US$ 55 billion to US$ 70 billion. The result was also above market projections, which at the end of December pointed to just under US$ 82 billion, according to the median expectations of economists consulted weekly by the Central Bank. For 2023, the midpoint of the projections is US$ 80 billion.

According to the Central Bank, the IDP balance for 2022 is equivalent to 4.76% of Brazilian GDP in dollars, compared to 2.82% of GDP in 2021. The level reached last year is the highest since 2000, when investment foreigners in the productive sector corresponded to 5.03% of GDP.

Central Bank data, especially the relationship between the IDP and GDP, is still subject to revision. The official result of the Brazilian GDP in 2022 will only be released by the IBGE in early March.

According to the BC statement, the increase in direct investment in 2022 resulted from the following factors:

• reinvested earnings increased by $16 billion compared to 2021, reaching $32.9 billion in 2022;
• equity holdings (excluding reinvested earnings) were $6.6 billion higher to $36.6 billion; and
• intercompany operations increased by US$ 21.5 billion, to US$ 21.1 billion (in 2021, the balance of these transactions had been negative).

The IDP result was more than enough to cover the country’s current account deficit, which increased to US$55.7 billion in 2022 (2.92% of GDP), from US$46.4 billion (2.81% of GDP) in the previous year.

According to the BC, the growth of the external deficit is due to greater deficits in services and primary income, partially offset by an increase in the trade surplus.